Increasing profitability is a key goal for many small-business owners. Here are six cost-effective tactics that could; if implemented properly, help you save money and increase profits.
The advantage of controlling expenses is that for every dollar you save by eliminating an expense, you gain an extra dollar in profits. This approach allows you to see every dollar that goes into the business bank account and decide whether spending that dollar is necessary.
2. Increase Margins.
The margin is the difference between the cost of goods or services your provide and what they are being charged out for. This requires knowledge of how to calculate your basic goods or services.
A small-business owner can increase his margins by raising prices, lowering the costs of goods or services sold, or both.
If you are reluctant to raise prices, keep in mind that customers generally tolerate price increases as long as the increases are competitive with those of other retailers and products.
Remember: Your customer does not purchase on price alone.
If you can demonstrate superior value (i.e. better service) they will be prepared to pay more for your goods or services.
3. Reduce Marketing Costs.
Invest in methods proven to increase profits, and stop using methods that show minimal results. There are two cost-efficient ways to do this:
Keep in touch with your customers through email instead of post mail.
Use social media as a way of contact
4.Manage Your Inventory (Your Stock).
Stay abreast of what is selling and which isn’t by monitoring your inventory. Based on that knowledge, determine if you are purchasing too few of the top-selling items or too many of the worst-selling items.
Calculate length of stock turnover and adjust accordingly.
You will end up with less stock and more money in the bank
5. Develop a Database. (Know the 80/20 Rule)
It’s crucial to keep track of customer purchases, because 20 percent of customers will generally generate 80 percent of sales.
There are two ways to keep track of customers, what they purchase, and how much they spend:
If you use credit-card processors in your business, you can store customer information automatically.
If you accept cash but not credit cards, you can train your employees to ask for customer information at the point of purchase.
With information from a customer database, you can offer your best customers promotions.
6.Seek Add-On Sales.
When a customer purchases something from you, offer a free sample item that will enhance the value of the original purchase. A free sample may encourage your customer to buy more or refer other customers to you.
Always explore the possibility that the customer will purchase more from you when extra service is provided i.e. McDonald’s tag line “Would you like Fries with that”?- Food for thought indeed!